At 7.3% in March 2022, the rate of inflation in Germany is at its highest since 1981! With the situation being much the same across the whole western world – the whole world full stop even – the legitimate question of price control is now an incisive one. It is imperative to reduce this pressure weighing on households, businesses, and the economy in general by any means necessary, at a time when the actions and solutions being proposed by our central banks aren’t working because they’re not being done quickly enough, though these methods have certainly not seen their time.
In times gone before – only twenty years ago actually – it sufficed to raise interest rates to temper economic growth and reduce the inflation it caused. In the current climate marked by a growth that is all but classic, since it is mostly down to the generosity of the state following Covid, and now eroded by a war, an inflation that could be avoided with strictly controlled prices would lead to fewer perverse effects on our already fragile economies than with sudden rate hikes. This is why surgical interventions are required in the sense that certain essential products and foodstuffs must be kept under control, likewise for certain vital services linked to the activities and daily life of everyday people.
Price control therefore makes up an integral part of the artillery at the disposal of the authorities who are making a point of combating the monopolistic behaviours and unfair competition of many producers that set their prices arbitrarily. Free markets are far from being perfect, or even completely free. Likewise, the myth that these same markets achieve full employment by adjusting prices to their optimum levels has passed! The examples are indeed legion where large businesses – that are royally indifferent to the increasing inflation – have recently enriched themselves more by raising their prices. Must we take care not to choose products and services whose prices will be temporarily kept at certain critical levels just because of some outdated principle?
The fundamental reasons for inflation, that are the combination of high demand and low supply, can of course not be combatted in the long-term by price control alone. However, the traditional cures cannot apply today because the central banks no longer have control, with the traditional approach of monetary policy now being defunct. They effectively have no way of fighting against vulture companies’ brutal and indifferent aspirations of raising prices, nor of solving the difficult problem of lagging production chains. The control of prices would therefore allow us to save time, a precious time to solve these deep-seated trends. This monitoring of prices would then be rolled back gradually in order to avoid any systematic take-off that would inevitably occur if it were to be removed suddenly.
But it is crucial to act now because the social costs of standing by and waiting for prices to magically come back to their senses are much too high.
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